Crisis as an opportunity

Crisis situations of a company can be broken down into six phases. The further along the crisis is, the closer to the brink of insolvency and the more difficult the turnaround.

• The first crisis phase is called a stakeholder crisis. It is characterised by conflicts and impasses between stakeholders (such as employees, suppliers, customers or creditors) or within the management. These are often accompanied by a departure from corporate values and the mission statement as well as mounting demoralisation among employees.
• This is followed by a strategy crisis, which manifests itself in the loss of market share and competitiveness. The causes are usually to be found in having bet on the wrong technology and market trends, bad investments or an inadequate innovation policy. The first two phases of a crisis are difficult to recognise and it takes time to implement countermeasures.
• Stagnating or declining demand for what were previously successful product groups strongly indicates a product crisis or sales crisis. Underutilisation of capacities, falling margins and an increase in capital commitments are the consequences. At this point at the latest, the involvement of professional turnaround advisors is warranted and a stabilisation of the business model is necessary. An existential crisis situation can be averted through the consistent implementation of suitable restructuring measures. The further developed the crisis, the greater the restructuring effort.
• A crisis in profitability is the fourth stage. Typical characteristics of this stage include declining profit or rising losses due to significant price declines for the main sales drivers or cost hikes. Equity is gradually eaten up over time and over-indebtedness may result. If a company is in this phase, there is an urgent need for action. Prompt, efficient restructuring is at this point a must. 
• The fifth phase is a liquidity crisis and is the last phase before actual insolvency. A company in crisis runs into difficulties effecting payment and its creditworthiness dissipates. The viability of the company is all of a sudden at stake. 
• The final phase of a company crisis process is actual insolvency. This occurs when there are no effective measures, or only ultimately futile measures, that can be taken to counteract the crisis. In particular, possible liability risks need to be carefully evaluated at this point. If the company is indeed insolvent, an insolvency petition must be filed. The company is namely at risk of a third-party application for insolvency at this stage. 

It is worth mentioning that these phases in a crisis do not necessarily have to occur in successive order. In other words, the phases can also occur simultaneously or even be skipped or omitted.

A holistic view of a company facing a crisis is of particular importance for a successful turnaround and to be able to surmount the crisis. It is important to pinpoint the causes that trigger the crisis and to apply the right levers to remedy the situation. To do this, all areas along the value chain need to be reviewed.

As a business owner, you have a comprehensive toolbox at your disposal to restructure your company and thus lead it out of the crisis. In doing so, not only classic corporate reorganisation and corporate restructuring along the lines of a turnaround, as described above, should be considered. If there is a severe liquidity crisis, another option is restructuring based on the new restructuring framework (StaRUG), which, in addition to the possibility of allowing the company to stay in operation, also encompasses measures which can help the company to eventually become profitable again. 
Even if out-of-court restructuring is no longer possible because the company has become insolvent, there are still possibilities for restructuring because the "insolvency" option is in the meantime no longer the "nightmare" that it used to be. 

So-called insolvency in self-administration offers a wide latitude for shareholders or managing directors to save the company on their own. They always remain capable of acting and in charge of the company, but are subject to the supervision of a court-appointed administrator. Insolvency proceedings (in self-administration) must be well prepared, however, and above all initiated at an early stage. Thanks to the many years of experience that dhpg's insolvency administrators possess in the conduct of insolvency proceedings, we can successfully prepare your company for this phase and support it throughout the process.

The duration of a restructuring process and the costs incurred for it depend on the company crisis and to what stage it has developed. Costs are usually based on the phase of the crisis in which the company currently finds itself and on the problem areas to be rectified that are at the roots of the company's situation. This question can therefore not be answered in general terms. However, an initial assessment can be made on the basis of a quick check of your company. Feel free to contact us and we will be glad to advise you personally and individually.

The involvement of professional restructuring advisors and reorganisation consultants offers wide-reaching advantages. In crisis situations, action usually has to be taken quickly and efficiently, which is why a high level of experience and knowledge of the particular industry are virtually indispensable. In addition, there is considerable pressure to take action, which is difficult for a management tied up in day-to-day business to cope with. We offer know-how and the capacity to restructure your company, including implementation of unpopular measures with a potential for conflict. We are ideally positioned to deal with all problem areas related to restructuring and help out wherever necessary.